Bayside NY Employee Retention Credit Taxable Income

 
Can you take the employee retention credit on the incomes paid out of your S corporation to you, the 100% owner? Now, this is a huge debate in the tax professional neighborhood right now. I'm not going to hang my hat on any one position until we get more information from the IRS on this, but if I had to lean one method or the other, I would lean in the instructions of saying that owner earnings in so far as we're talking about somebody who owns more than 50 percent of business, do not certify.
  
 
Just how It Functions
I don't wish to get too technical here, however Area 2301(e) of the CARES Act -- which produced the employee retention credit -- says that for functions of the employee retention credit, "guidelines comparable to the rule of areas 51(i)( 1) and 280C(a) of the Internal Revenue Code of 1986 will use," don't get captured up on the 1986, that's just the last time the Internal Income Code had a significant overhaul, so it's simply referred to as the Internal Profits Code of 1986. The fundamental part here is those other code sections recommendation.

Since that's the easy one, let's start with 280C(a). That is simply stating that if you get a credit on some earnings you pay in your service, you can't double dip and take a deduction for those same wages. However now let's discuss section 51(i)( 1 ), which states, "No wages will be considered ...

with respect to an individual who bears any of the relationships explained in subparagraphs (A) through (G) of area 152(d)( 2) to the taxpayer, or, if the taxpayer is a corporation, to a person who owns, directly or indirectly, more than 50 percent in worth of the impressive stock of the corporation, or, if the taxpayer is an entity other than a corporation, to any individual who owns, straight or indirectly, more than 50 percent of the capital and revenues interests in the entity." So let's focus on the provision that says "if the taxpayer is a corporation" because we're presuming an S corp taxpayer here.Let's focus on the stipulation that states "if the taxpayer is a corporation" because we're assuming an S corp taxpayer here.That is simply stating that if you get a credit on some earnings you pay in your organization, you can't double dip and take a deduction for those exact same salaries. Let's focus on the provision that says "if the taxpayer is a corporation" due to the fact that we're assuming an S corp taxpayer here.

So this is stating that you don't take into consideration wages with respect to a person who owns, directly or indirectly, more than 50 percent in value of the exceptional stock of the corporation. This is stating that you do not take into account earnings with regard to a person who owns, directly or indirectly, more than 50 percent in value of the impressive stock of the corporation. That appears clear to me that owner wages do not qualify. Now, some tax specialists are looking at the employee retention credit qualified incomes FAQs on the IRS website, and they're taking a look at FAQ 59, which states, "Are incomes paid by an employer to workers who are associated individuals considered certified wages?

" and they're stating, "Look at the answer here. It's just these family members whose earnings don't count. And the IRS didn't particularly say owner earnings or partner incomes do not count here, so bad-a-boo, bad-a-bing, therefore owner wages need to count." To that, I would say, "Look. The IRS site is not the tax code. That appears clear to me that owner incomes do not certify. It's only these family members whose salaries don't count. The IRS site is not the tax code.